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Derin Clark

Derin Clark

Online Reporter
Published: 06/03/2019

The first-time buyer market is booming, with the number of people buying their first home hitting its highest level in 12 years, according to data from UK Finance. This has led to increased competition among mortgage lenders seeking to attract new homeowners and, as a result, means those looking to get onto the property ladder are able to take advantage of some competitive mortgage rates.

Last month we reported that there was a 1.9% increase in new first-time buyer mortgages completed in 2018 compared to 2017, plus research carried out by showed that last year the average two-year fixed rate mortgage on offer to those with a 5% deposit (95% loan-to-value) dropped from 3.95% to 3.41%.

However, the most competitive rates for new buyers can be seen in discounted variable rate mortgages. For example, The Loughborough Building Society is currently offering the lowest rate for first-time buyers, with a discounted variable rate of 1.99% for two years that reverts to 5.34% thereafter. This rate can be obtained with a minimum deposit of 5% and there is a completion fee of £999. Another provider offering a highly competitive variable rate is Melton Mowbray Building Society. This 95% loan-to-value mortgage has a discounted variable rate of 2.79% for three years, which then reverts to an existing borrowers rate of 4.99% for the remaining term. This deal is completely fee-free and even gives new homeowners cashback of £250 to further sweeten the deal.

While variable rates tend to be the lowest on offer, there are some highly competitive fixed rates currently available on the market as well. Fixed rate mortgages are ideal for those wanting the security of knowing that their mortgage rate, and therefore repayments, won't change within the fixed period. Barclays is currently offering a rate of 2.88% that's fixed until 30 April 2021 and requires a deposit of just 5%, with no fees payable and the added incentive of a free valuation. Alternatively, Saffron Building Society has a fee-free deal that boasts a competitive fixed rate of 3.07% until 31 July 2022, which is again available to first-time buyers with a minimum deposit of 5%.

Although the first-time buyer market has become more competitive, the lowest mortgage rates are still only obtainable with a higher deposit. Comparing the examples above that all require a minimum deposit of 5%, if a homeowner had a 35% deposit (65% loan-to-value) they would be able to obtain a two-year fixed rate mortgage from Yorkshire Building Society that boasts a rate of 1.46%, which remains fixed until 31 March 2021. Alternatively, with a deposit of 15% (85% loan-to-value) house buyers can get Post Office Money's two-year fixed rate of 1.90%, a deal that comes with a free valuation and £500 cashback which should help offset the £495 fee, and even a deposit of 10% could secure first-time buyers a deal of 1.99% from first direct.

This all means that despite the current economic uncertainty, now could be a good time for those looking to get onto the housing ladder and take advantage of the competitive market, particularly if they're able to save a higher deposit than the 5% minimum.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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